Palo Alto races against the clock on infrastructure fixes

City Council to consider next steps for 2014 ballot measure on Oct. 28

When Palo Alto officials began their journey nearly three years ago to refresh the city's aged infrastructure, their expansive wish list included an upgraded Cubberley Community Center, street repairs and a host of bike improvements, including a new bike bridge over U.S. Highway 101.

The City Council's plan, at the time, was to ask city voters to approve a bond in 2014 that would fund many of these improvements.

On Oct. 28, when the City Council convenes to consider its next steps, the infrastructure outlook they will be looking at will be starkly different than it did at the starting line. The city's Cubberley lease with the Palo Alto Unified School District remains up in the air, making its inclusion in a bond measure unlikely; the cost of the new bike bridge has been largely covered by regional grants, and the new police building's future remains loosely tied to Jay Paul Company's proposed but not approved office development on Page Mill Road.

At the same time, the city has more than doubled its expenditure on fixing up cracked streets and sidewalks, addressing one of the major problems identified by the specially appointed Infrastructure Blue Ribbon Commission in 2011.

Though many of these changes are positive developments, they have also created a problem for the council, which now finds itself quickly modifying its 2014 plans to keep up with political realities. Rather than preparing for a broad bond campaign of the sort that the city undertook in 2008 to renovate local libraries, the city is still trying to figure out what exactly it wants to do. Despite more than a year of staff analysis, eight meetings of the council's specially appointed committee and detailed polling, the city remains far from certain about what measure, if any, the voters will see next year. Rather than gelling into place, the plan for the 2014 election remains as uncertain as before.

After eight meetings spanning from March to Oct. 1, the four-member council committee charged with recommending a possible ballot measure instead recommended more polling and further exploration of various revenue options.

Some council members, including Vice Mayor Nancy Shepherd, remain enthusiastic about a 2014 bond to fund the needed public-safety improvements, but they also recognize that they are now racing against the clock.

"We're beginning to run out of time for the November 2014 ballot," Councilman Larry Klein said at the Oct. 1 meeting, after the committee authorized more polls and analysis.

Specifically, the city is now looking at five different options for raising revenues for infrastructure, most of which were not on the radar two years ago: an assessment fee to pay for new parking garages, through the creation of Mello-Roos districts; a one-eighth-cent sales-tax increase; raising the hotel tax by either 2 or 3 percent; a general-obligation bond to pay for public-safety facilities; and a general-obligation bond to pay for transportation improvements. Pending the council's approval on Oct. 28, staff and the city's polling company will also consider how voters would react to these revenue-raising measures in the context of city's revision of utility-users-tax methodology. The polling will be conducted in November and December, after which time the council is expected to decide whether or not to pursue a 2014 infrastructure measure.

The biggest wildcard in the conversation remains the police building. In 2011, the citizens committee argued that the project has been "dangerously deferred" and recommended floating a bond to pay for it "as soon as possible." But in June, the council learned that such a vote would be far from a slam dunk. According to a poll commissioned by the council, only 60 percent of the respondents to the poll gave high marks to "providing police officers with the facilities and resources needed to investigate and prosecute crimes committed in our community" and only 52 percent said they would support spending "$57 million to buy land and construct the public-safety building," well short of the needed two-thirds threshold needed (by contrast, things like bike improvements and fire-station upgrades received more than 70 percent support).

Another option for paying for the new police station also now looks shakier than it once did. The proposal by Jay Paul to build a new police building for the city in exchange for permission to construct 311,000-square feet of office space at 395 Page Mill Road has recently encountered a few technical and political setbacks. In April, the council's Infrastructure Committee agreed to expedite the review process for the dense new development, with the hope of having a traffic analysis in place by this fall. Instead, planning staff saw some problems with the preliminary traffic analysis, prompting delays. Staff is now working with traffic consultants to refine its methodology and looking at the traffic data associated with San Mateo's new police station, according to project planner Jodie Gerhardt. The report now isn't expected to be completed until December, she said.

At the same time, the "planned community" zone that Jay Paul is seeking remains as controversial as ever. The last such zone change that the council approved — to enable a 60-unit apartment complex for low-income seniors and 12 market-rate homes on an orchard site at Maybell and Clemo avenues — sparked a referendum petition that voters will decide upon on Nov. 5. For many opponents of this project, the fight is as much a referendum on "planned communities" in general. On Oct. 1, Shepherd suggested that given the current political climate, the city should take another poll to gauge public opinion on the police building and stressed the need to continue to work toward a 2014 bond.

"I think the needle might have changed because of the publicity around Jay Paul and the density in Palo Alto," Shepherd said when urging a fresh poll for a police-building bond. "We'd have better indication about the seriousness I have about having to get this public-safety building built. The council needs to get some direction from the community about how we're going to do this, whether it's through a PC or through this (tax increase)."

The resurgence of parking as a top issue has also changed the game. While new parking garages didn't factor into the discussion in 2011 or 2012, the council now sees them as one of the city's top priorities. At the Oct. 1 meeting, Mayor Greg Scharff observed that parking has become a "really high-profile issue," with many Professorville residents appealing to him to pursue more more parking garages. As a result, the city is looking at creating Mello-Roos assessment districts to fund parking garages.

"I think this may have moved," Scharff said, referring to residents' willingness to pay for more garages. "Every newspaper article in Palo Alto is talking about parking problems and what we're going to do about it. I bet the numbers have moved up."

With the clock ticking and so many questions unanswered, the council's Infrastructure Committee also tossed out another idea: Rather than rushing toward a 2014 bond for the new police building, waiting to see to see how the Jay Paul project shakes out and, if it falls through, asking the voters to pass a bond in 2016.

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Staff Writer Gennady Sheyner can be e-mailed at gsheyner@paweekly.com.

Posted by resident, a resident of Evergreen Park
on Oct 19, 2013 at 5:29 pm

It's hard to imagine a bond measure passing next year, given all the current controversies the City Council is in the midst of. I suggest they table this idea. How about bringing back an improved version of the business license tax idea?

Posted by Clyde, a resident of Esther Clark Park
on Oct 19, 2013 at 7:52 pm

How many polls does Council need to do to figure out that the voters do not trust them or Staff. Too many empty promises and one disaster of a project after anothr. No new taxes until a new Council shows it can be a responsible steward of our tax dollars and city.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 19, 2013 at 7:59 pm

Before the City can ask for money, I would expect to see a really clear picture of what businesses contribute in revenues, compared to residents.

A breakdown by category, retail, hotels, and offices. Especially offices, how much does the City bring in from regular office space?

Unlike homeowners, businesses do not pay for schools, they don't pay for public parking.

What does office space pay for, since they also do not bring in sales tax revenue either?

Question about the police building.

Why not sell the building they are in right now, build a new one with the money.

Posted by common sense, a resident of Midtown
on Oct 19, 2013 at 9:15 pm

Famiglia,

Businesses do pay for schools; about 48% of property taxes everyone pays go to the schools, around 8% of property taxes go to the city. In addition all the "personal property" like cubes, desks, computers, etc is taxed every year, and the same ratio goes to the the schools & city.

Businesses also have out of town visitors who stay at local hotels, and their stay at the hotel is taxed at 12% of the room rate. And they support the restaurants when they eat locally, with the sales tax on their meals. And they pay sales tax on stuff they sell/buy. Out of the 8.75% sales tax, the city gets 1%.

And Businesses pay a utility users tax.

You know who doesn't pay for schools - all that BMR housing, like the development being proposed on Maybell. So out of the over 1000 housing units of BMR rentals, many of which send kids to the local schools, not one penny is being paid to the school district.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 19, 2013 at 11:35 pm

common sense,

Would you know what the relative amount of property taxes is from homeowners compared to businesses in Palo Alto?

I recalled this data found by a Menlo Park resident when actually digging into the numbers

"by 2008, homeowners were paying two-thirds and commercial property owners one-third (of property taxes), despite the fact that the major development in the county over those 30 years was commercial property east of (U.S.) 101."Web Link

Restaurants, Stanford shopping center and shops downtown are also frequented by local residents.

Posted by common sense, a resident of Midtown
on Oct 20, 2013 at 12:47 am

Famiglia,

To me the issue isn't Prop 13, but it's the poor decision making the City Council has made over the past 10 years in spending the taxpayer's money.

10 years ago, the city budget was around $104 million; this year it is around $151 million - a growth of 45%. The CPI over the same period of time has grown only 24%.

Do you know where all that budget money has gone? Back in 2006, the City Council voted to enrich the city staff's pensions, from 2%/30 to 2.7%/30. What that means is that after working 30 years, instead of getting a pension equal to 60% of salary, the person gets a pension equal to 84% of salary. That increase in pension liability meant that much of that growth in revenue that the city got in the past 10 years has gone to paying this enrichment of pensions, not to fixing infrastructure or building a new public safety building - over $100 million in the past 10 years.

Even with that additional $100 million, the city has an unfunded pension liability, you won't find in any of the budget reports. Also left unspoken is that this unfunded pension liability is based on the pension fund earning a 7.5% return. In comparison a 30 year mortgage is only 4.25%. Any underperformance of the return on the pension fund will come back to us taxpayers.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 1:52 am

common sense,

"10 years ago, the city budget was around $104 million; this year it is around $151 million -"

This 10 year time period may be the biggest Palo Alto real estate spike in history, with record turnover in homes?

Residential revenue contribution I would imagine is the bulk of the growth. For the time and energy City Hall spends on office space development, you would think the returns would be bigger.

I agree with you about spending, and the unfunded pension liability, and hope this is all looked at together.

Posted by common sense, a resident of Midtown
on Oct 20, 2013 at 7:48 am

Famiglia,

Sales of existing residential property is typically 2-3% per year; there has been a building boom with the addition of over 2,000 residential units between the 2000 census & the 2010 census; this has resulted in the population growing from 58,000 (year 2000) to 63,000 (year 2010). Assume the average price for each of those residential units is $1 million, then there is an additional $2 billion in property value, resulting in another $20 million in property taxes.

Also when houses have additions or when houses are torn down and new ones built, there is a reassessment for the value added. I don't have data, but driving around and seeing many of the tear downs/McMansions built, that also has contributed to the property tax base. Same thing happens with commercial property when an old company leaves, and a new company moves in; the improvements made increases the property tax base.

Posted by Resident, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 8:33 am

Nowhere do they seem to think that better money management for the money they already have is a worthy goal.

I think that most residents would feel much happier about this if we knew that the Council and City Hall were looking at ways to save some of their wasteful spending habits. All we see is money being spent on frills and pet projects rather than trying to work out where the money has been misspent. Our property taxes continue to climb, there are more and more homes being built which means that there are more people contributing to the pie, but yet the City continues to feel that infrastructure is something they have no money to upgrade.

If I ran our household budget the way Palo Alto spends its income, I would be considered a spendthrift.

I just have no sympathy for the woes of those asking us to throw more money to them for basic bread and butter items.

Posted by Marrol, a resident of Embarcadero Oaks/Leland
on Oct 20, 2013 at 9:16 am

Poor planning and not having a logical financial plan on the part of our city leaders and elected officials have put us in this difficult position. The bad decisions that got us here unfortunately continue. They grossly overspent for decades, and continue to overspend on non-essential projects, feel-good services, and fluff. When you ignore your basic responsibility to pay for our essential civic needs from existing budgets, then this is what happens. They return once again, hat in hand, crying poor, and asking the tax payers to foot the bill for work that she have already been funded and completed.

Sorry, but they need to do what the rest of us do when we face expenditures in life, especially for the basic things like paying your bills, fixing the leaky pipes, or repairing the hole in the roof. You spend less, cut corners, eliminate the non-essential spending, save money, and find a way to pay for it within your existing. What you don't do is go to your employer and ask for a pay raise because you're not making enough money to pay for these essential things in your life. That's basically what the city is doing, and I say no to any bond measure, and no to a tax increase. It's time that we put them in their place and send a clear message that we're not going to bail you out again.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 10:20 am

Common sense,

"Assume the average price for each of those residential units is $1 million, then there is an additional $2 billion in property value, resulting in another $20 million in property taxes."

I would say this is conservative given the meteoric rise in home prices. What happened the last ten years may never happen again, and that should be part of the planning.

If the City is going to send me a bill, I want to know exactly what the numbers are, including the proportion of revenues by category (retail, housing, office space). Not in a 300 page document, but a one page summary with historical numbers back ten years.

Without a clear updated financial picture of the City finances, how can we be asked to contribute even more to the costs.

Homeowners are paying through the nose, I'm not sure businesses and developers are carrying the same weight until I see numbers, and until we know more, how can office parking be at the top of the list of priorities?

And worrying about parking without addressing traffic and the destruction of livability of the town?

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 10:26 am

Forgot to mention, besides the revenue and expenses summary by category, current and historical. I would also like to see projections.

If the City does not have the ability to put this on paper, they have no business asking for anything.

And no, I do not want to be sent to a website link. A full page or two on the Weekly and other newspapers next weekend would be fine.

@Famiglia - Great idea! I would love to see clear revenues and expenses by category and very specific category at that. How much revenue do we get from our Rec programs, from out field rentals, from Rinconada pool rentals and how much do they cost us? How much revenue does the Children's Theater produce and what does is cost us? Same for the Junior Museum, Libraries, etc.

@Marrol - the voice of reason as always, The City needs to bring expenditures in line with revenues and come up with a long term plan to stop frivolous spending (I consider anything that is not public safety related to be frivolous if there is not enough $$).

Posted by PA007, a resident of Community Center
on Oct 20, 2013 at 12:11 pm

No money left? Even with more than 30% increase of the property tax revenue? It's sad that all the fines, tax incomes and Stanford fund are here used to support the operation and the retirement for the city ....

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 12:25 pm

palo alto resident,

You appear to be jumping to issues about what matters, to whom, and who it serves.

Great discussion after we know what the numbers are in full context?

There may be no right or wrong, but to arrive at what is a priority, and what the bill is, I expect full disclosure.

For example, how do you ask residents to pay for office parking and raise the sales tax on them when we live here and everything will go up for us, compared to the occasional tourist.

I want to know the numbers to see why any of it makes sense.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 12:58 pm

When referring to office parking, I mean residents being asked to pay for parking for the new office space developed in town.

I really hope that any further chatter about this will be with City numbers, as per my previous posts.

@ Famiglia -I agree with you that detailed, exact revenue and expenditure numbers would make for the most informed discussion.

I personally feel we should focus on things that are essential then those that will benefit the majority of the residents, not just a vocal minority or pet projects.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 6:00 pm

palo alto resident,

"I personally feel we should focus on things that are essential.."

You know, that's the funny thing, on the one hand home prices are exploding. there is a major spike in office development, certainly in retail, restaurants, hotels, etc. so in theory things are supposed to be good!

When things are good, essential stuff should already be taken care without the need to debate, yet there are potholes everywhere, literally and figuratively, and everything from City Hall is a needy cry for help.

I will be looking for the one pager- two max with the executive summary. Including the proportion of property and sales taxes that is coming in from businesses broken out by retail, office space etc.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 20, 2013 at 6:04 pm

The numbers should also have historical figures, and projections.

Posted by paco, a resident of Old Palo Alto
on Oct 21, 2013 at 10:31 am

It is easy to see why a infrastructure bond in 2014 is such a hard task for the public to grasp just by the reading the responses and the lack of those posting to remain focused on what the subject is. To the poster who claims all the city woes are because they offered their employees 2.7%/30, neither CalPERS or the city has ever had a pension plan such as 2.7%/30. Perhaps you should evaluate your comments prior to posting. It would appear your concern is that employees care enough about their community to stay employed with the city for 30 years. Not to worry, the inept city manager and city council have been promoting their philosopy that their employees are a "liability" for several years which has created a mass exodus of their most knowledgeable employees. What a great business model for success!

Posted by Joe, a resident of Another Palo Alto neighborhood
on Oct 21, 2013 at 11:54 am

&gt; Not to worry, the inept city manager and city council have been
&gt; promoting their philosopy that their employees are a "liability"
&gt; for several years which has created a mass exodus of their most
&gt; knowledgeable employees.

Really?

Does the City publish its yearly turnover and retention rates?

If not, then how do you come by your claim?

Posted by Joe, a resident of Another Palo Alto neighborhood
on Oct 21, 2013 at 12:06 pm

&gt; "Assume the average price for each of those residential units is
&gt; $1 million, then there is an additional $2 billion in property
&gt; value, resulting in another $20 million in property taxes."

The County Assessor publishes the yearly accessed value, and the number of parcels, for each of the municipalities in the county. The increase, or decrease, of aggregate assessed value can be obtain from this annual report.

Don't forget, that the PAUSD gets about 46% of every property tax dollar here in Palo Alto.

&gt; "10 years ago, the city budget was around $104 million;
&gt; this year it is around $151 million

Yes, this is one of the core issues we need to deal with. The City is now so cash-rich that it is seeing over 1 billion dollars every 7-8 years. About 85% of that money is spent on employee's salaries and benefits. Why? Well, because Palo Alto has never had a meaningful long-range financial plan, that targets a percentage of the yearly revenues into reserve funds to be used to deal with infrastructure issues. Year after year, we've seen the labor unions say: "how much money do you have in the general fund? Ok, we'll take it!" And the Councils have just caved in.

Of course, they have had a lot of help from residents who want new parks, and big libraries, lots of children's programs, and free shuttles, and this and that and the other. Council members, being political animals first, bend to the path of least resistance, and say "yes" to anyone who shows up wanting a hand out.

If the City government had managed to hold back just 5% a year from its yearly spending, it would have a nest egg of about 55 million dollars in the bank. If it could have held back more--then the nest egg would have been larger.

We have a City Council that believes that all you have to do is spend yourself broke--and then raise taxes. It's that simple.

@ Marrol: Precisely. It's called planning for the future, not spending for today.

Posted by Marrol, a resident of Embarcadero Oaks/Leland
on Oct 21, 2013 at 5:21 pm

You would think it would be the biggest no-brainer ever Crescent Park Dad, especially for a small municipal government. The frivolous and irresponsible spending is an affront to the tax payers. Our city leaders and elected officials cater to the special interest and niche groups, seemingly without the slightest consideration of funding our base level civic needs through our existing budget. What did they think was going to happen.

It's high team that our city officials learn to say no to the special interests. They need to demonstrate some courage and begin to identify which city funded programs and services can either be outsourced, reduced, or eliminated entirely. Most recently they had an opportunity to take a positive step in that direction by outsourcing our animal services, but no, they allowed themselves to be shouted down by a vocal minority. They continue to spend on frivolous, non-essential projects such as park upgrades, playgrounds, commercial district make-overs, art center remodels, golf course design, and bike bridge construction. These are examples of desired improvements, certainly not essential ones. You don't spend millions of dollars on this type of civic work when we have no legitimate plan on how we're going to pay for our truly essential and critical needs in public safety and infrastructure. The solution that we're heard is to float another bond measure and raise taxes. No. Not after years of irresponsible spending. We tax payers have to send a clear message that we will not bail them out again. No on a bond measure. No on new taxes.

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 21, 2013 at 5:43 pm

Joe,

We don't really know exactly what the revenue growth has been, which is why details are critical.

WHat we do know is that the last years have been an economic boom for Palo Alto in housing and business growth.

If the City is out of cash, this will be the most wasteful decade. I say this after driving on Forest between Middlefield and Cowper which looks like a street from an underdeveloped country.

We may need to outsource financial management, or hire an independent analyst to go dig up some numbers at City Hall.

Posted by Joe, a resident of Another Palo Alto neighborhood
on Oct 21, 2013 at 7:26 pm

&gt; We don't really know exactly what the revenue growth has
&gt; been, which is why details are critical.

The City's budgets, and CAFR, are quite comprehensive, and have never been the point of criticism about a lack of clarity where the actual yearly revenues are concerned.

By simply using the yearly budgets, and building a small spreadsheet to track the revenues--the growth becomes clear.

There have been some problems with the budgets, over the years, not providing any sense of future liabilities for pensions, and healthcare, however.

&gt; If the City is out of cash

The City is not out of cash. The City's finances are a little hard to understand, if you only want to spend ten minutes looking at the budget. For instance, the City has some sizeable reserve funds set aside for dismantling a dam that it has co-ownership responsibilities for. Unfortunately, this money is in the Utility's Enterprise Fund domain, and can not be legally used for anything other than utilities.

In cases of financial challenge, the City can simply stop spending money, or it can borrow from some of its other reserve funds. However, this money does have to be paid back.

The question is: did the City use the money it had intelligently. If you believe that hiring a lot of people, and finding yourself committed to paying their pensions and healthcare after they retire--then the City did a bangup job. If, on the other hand, you believe that money from the Utility that was legally available to be spent for City infrastructure was not spent reducing the infrastructure--then you will be one of the many who believe that the City has wasted more than a decade's wealth on "services", and unnecessary expenditures, which made the Council, and Staff, "feel good".

Posted by Famiglia, a resident of Another Palo Alto neighborhood
on Oct 21, 2013 at 7:51 pm

Joe,

Thanks for the info, but we shouldn't each have to do a spreadsheet on our own, to figure it all out.

A one page summary, two-max should be made available.

I actually don't want to see a budget.

I want to see historical numbers for the major categories of revenues, broken out a bit between homes, office space, retail. Expenses too.

Posted by Joe, a resident of Another Palo Alto neighborhood
on Oct 21, 2013 at 9:47 pm

&gt; we shouldn't each have to do a spreadsheet on our own,
&gt; to figure it all out.

You're right. The City should be making this information available on its "open data" web-pages. On the other hand, every person has some different point-of-view, so making the raw data available is the least we should expect from the City.

&gt; I actually don't want to see a budget.

Everything starts from the budget.

&gt; And what about this famous Utility fund?

The same information about the Utility Fund should be made available also. Sadly, no one on the Council, and few people in the electorate, seems to care about having access to this data.

I don't understand all the "Funds" lingo. General, Capital, Enterprise and the charges among each of them. The General Fund has Sales and Property Tax, the Enterprise Fund has "Net Sales" as Revenue. What would Net Sales be, sale of property?

This brochure also doesn't really have a detail for property tax revenues. Exactly how much is from homes, from office space. I don't see the pension items.

My hope is that Council/City can translate all this into a clearer analysis ( for years 2003-2012) but appreciate that there was once an attempt to do do so.

Posted by joe, a resident of Another Palo Alto neighborhood
on Oct 22, 2013 at 8:12 am

&gt; I don't understand all the "Funds" lingo. General, Capital,
&gt; Enterprise and the charges among each of them.

This can be confusing, particularly since municipal accounting is different than private sector accounting, in many ways.

However, all of these terms could be explained via a series of tutorials that the City could develop that could be uploaded to its web-site, or Youtube. We must come to accept that some things are complicated, and that complicated things are not readily explained, or understood, by everyone.

At some point, the residents need to comfortable with the fact that their City government has no intentions of explaining what it is doing with their money, or the residents need to make it very clear to the City that it needs to do a better, even much better, job than it has been doing explaining its activities, and results.

The City has actually done a better job in the past couple of years identifying future pension costs--but this has been driven by the Government Accounting Standards Board (GASB), rather than resident dissatisfaction with the work product of James Keene and his staff.

Many of your complaints could be answered with tutorials, and more transparency. Perhaps you might help by writing the Council to express your concerns, and outlining the kinds of information you would like to see delivered to the public on a yearly basis.